US housing affordability slides to a 10-year low in the third quarter

A modest bump in national interest rates coupled with rising home prices kept housing affordability at a ten-year low in the third quarter of 2018, according to the latest Housing Opportunity Index (HOI) by the National Association of Home Builders (NAHB).

And while home prices were up, a slowing in national home price appreciation may give buyers some breathing room as inventory continues to tighten amid lagging construction levels.

“Ongoing job and economic growth provide a solid backdrop for housing demand amid recent declines in affordability,” said Robert Dietz, NAHB Chief Economist, in a statement.

At the national level, home prices increased 5.6 percent year-over-year and are forecasted to rise at a more “moderate” pace of 4.7 percent over the next year. According to recent data from CoreLogic, the erosion of affordability in the highest cost markets has begun to slow home price growth.

The national median home price edged up from $265,000 in the second quarter of 2018 to $268,000 in the third quarter —the highest quarterly median price in the history of the HOI.

After adjusting for inflation, national home prices are still 13.3 percent below the 2006 peak.

In all, over 56 percent of all homes — including new and existing homes — sold between the beginning of July and end of September were affordable to families earning the national median income of $71,900. This is down 1.1 percentage points from the second quarter and is the lowest reading since mid-2008.

Average mortgage rates rose by a nominal 5 basis points in the third quarter to 4.72 percent from 4.67 percent in the second quarter.

For the second straight quarter, Syracuse, NY, was the nation’s most affordable major housing market. Over 88 percent of all homes — new and existing homes — sold in the third quarter were affordable to families earning the area’s median income ($74,100).

San Francisco, CA was the nation’s least affordable major market San Francisco for the fourth straight quarter. Only 6.4 percent of the homes sold in the third quarter of 2018 were affordable to families earning the area’s median income ($116,400).